Check Fraud Explained by One of Hollywood's Most Infamous Conmen

December 2, 2016 Lauren Ruef

In Frank's own words to reporters:

"It begins with my parents' divorce and its dramatic effect on me. I ran away and suddenly found myself a teenager alone in the world. I had to grow up very quickly and become very creative in order to survive. But what started out as survival became more and more of a game. I was an opportunist, so when I saw an opening I asked myself, 'Could I get away with that?' Then there was the satisfaction of actually getting away with it."

How a runaway teen from a middle-class suburb of New York impersonated an airline pilot, medical doctor, and Harvard-educated lawyer is a simple confidence trick combined with a common sleight of hand: the writing of bad checks. Frank's story had all the makings of a Hollywood blockbuster, but there are many real-life opportunists like him looking to scam businesses and individuals through forgery, fake checks, and cyberfraud schemes.

A cyber criminal reaching through a computer screen to steal credit cards and check books from an office desk
Created by Ryan Mason

The anonymity of cyberfraud

Few criminal stories have captured the imaginations of an audience quite like Frank's, but most cases of check fraud are not so glamorous. The obscurity of the internet has thrown the door wide open to many types of fraud. Internet phishing scams, credit card data breaches, and identity theft are everywhere (most recently with lost personal information in the Equifax credit report breach), with no easy way to track down the perpetrators.

Jurisdiction is a specifically difficult point for law enforcement agencies in cybercrime-related cases, as the perpetrator of these crimes may be masking their location or operating from a different city, state, or country than their victims. Law enforcement agents must build their case in adherence to the laws of their specific jurisdiction, so you can imagine that when a hacker in Southeast Asia is stealing the identities of people in small-town Indiana, it gets complicated really fast. With the internet a relatively new addition to most of our lives, the precedents for these cases are still being written.

While banks and airports aren't as naive as they were in the 1960s, the art of fooling people is as easy as it's ever been. A suave, well-dressed confidence impersonator like Frank would find himself an overachiever in this kind of market. Where there's money to be made scamming people on Craigslist, their personal email inbox, or a faux business website, fraudsters will do it. And they can do it from the comfort of their own couch if they really want to.

The internet has only made check forgery easier

How modern businesses adapt to this fraud risk is imperative, as 50 percent of U.S. businesses still use checks to pay their vendors. Frank informed Wired Magazine why check fraud is easier than it's ever been:

"What I did was almost 50 years ago and it's about 4,000 times easier today to con people than when I did it. To forge a [check] 50 years ago, you needed a Heidelberg printing press, you had to be a skilled printer, know how to do [color] separations, negatives, type-setting... those presses were 90 feet long and 18 feet high. There was a lot of work involved in creating a [check]. Today, you open a laptop."

Tried by a U.S. federal judge and sentenced to 12 years in federal prison, Frank served a few of those years until entering a conditional agreement to help the Federal Bureau of Investigations counterfeiting operation, without pay, for the remainder of his sentence.

Frank is now one of the world's leading experts and consultants on check forgery and cybercrime. He has advised many longstanding banks and financial institutions on counterfeiting and payment fraud tactics and has continued to host trainings for FBI field offices for the past 40 years.

This advice, included on his website, provides timely guidance to those seeking to avoid being a victim of fraud: "Mr. Abagnale believes that because punishment for fraud and recovery of stolen funds are so rare, prevention is the only viable course of action."

Reduce risk of fraud by keeping up with the technology that's enabling it

Only some U.S. businesses take drastic preventative measures against manual check scams through technology. High security business checks printed with controlled check stock, custom watermarked paper and prismatic backgrounds that foil fraudulent check scanners are security features that have helped, but the elimination of check fraud for banks, e-commerce merchants, and other businesses will only come with a more aggressive approach.

Access to company check stock can vary depending on the customized controls at your organization, and the likelihood of someone inside or outside of the organization impersonating your company when paying vendors is hard to prevent on paper.

ACH and credit card transactions provide much higher visibility than paper checks for businesses, and the process on both ends is much more secure than verifying, tracking, and reconciling a paper check payment. In fact, choosing a payment automation software eliminates the need for AP to chase down these paper trails.

Many businesses choose to go with a payment automation service for the security advantages alone, but other benefits include time savings, early pay discounts offered by vendors, and the overall benefit of having electronic payments catalogued and prepped for auditing purposes.

Stay ahead of vulnerabilities

Make sure the right practices for security are in place so that fraudulent transactions aren't slipping through the cracks at your organization. This is a task that not only falls to accounts payable, but the IT department as well.

Here are few things you can do to improve fraud detection and stay ahead of scammers seeking to target your organization:

  • Host a company-wide Acceptable Use Policy training for employees and address online phishing, business email compromise scams, and your company's policy for wiring funds
  • Limit or eliminate check writing completely from your AP department by automating vendor payments
  • Keep software updated and ensure appropriate firewall protection for remote employees using a network VPN (virtual private network)

By taking the appropriate measures to protect the security of your financial data at all times, these steps will pay off. As Frank knows best, it takes little effort or skill to pull off a successful con. Check forgery is a simple counterfeiting art, but it's done every day as a means of scamming businesses out of hundreds of thousands of dollars. According to the Association for Financial Professionals 2016 Payments Fraud and Control Survey:

"Checks still continue to be the payment method most often targeted with 71 percent of companies experiencing actual or attempted check fraud."

While ePayments may not be a certified guarantee of 100 percent fraud prevention, it will certainly lessen the avenues cybercriminals are taking to hack into your company's financial data.

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